What is this chart? This is the MSCI Real-Estate Investment Trust (REIT) Index, it is the Index that DRV is backed by. DRV is a 3xLeveraged Short Real-Estate ETF.
Why is it important? Because if you buy DRV while RMZ is crashing you can make some pretty insane returns. If you look at the Elliott Wave count on this chart and on the related SPX500 chart you will see that the counts are basically the same, it appears that we are in the midst of a non-limiting triangle that is at the end of a double combination. This means that both the Stock Market and REITs are going to stop growing for the next year or two and then at some point, after the triangle is complete, they are going to collapse. This basically means that the entire US Economy is going to go to shit like it did in 2007-09. Since it is a double combination that would imply around an 80% retracement of the Bull run starting in 2009.
(SPX500 - Multi-year Elliott Wave Forecast...)
How do we know if this chart is correct? Well we already have the break down out of the channel, and triangles are generally pretty easy to detect even in the very early stages. It also appears that there is significant momentum resistance and we are finding some resistance underneath the channel as well. There's also a perfect double top with the peak we made in the beginning of 2007. At this point it would take a whole lot for this to actually be able to push above the high, and I'd say that it is more or less confirmed. If the high is broken then it may be a good idea to change to a neutral economic outlook until more data is available.
Remember that DRV is the big play here. The gains made from shorting RMZ are nothing compared to what DRV could be worth in a recession. The only reason we look at RMZ is because it is the underlying asset for DRV and because it's wave patterns are much more clear.
The clouds are definitely dark over Cyclical City, I would be seriously cautious about being invested in housing and anything that is cyclical in nature for the next couple of years. The market has had a good run for the last 7 years but now it looks like its time for the cycles to change and for the Economy to once again enter into a bearish period.
Another interesting thing I noticed when I accidentally analyzed the wrong chart, is that the MSCI Inc. Stock (The company that makes these Indices) looks like it could be reaching a peak. This would still be pretty speculative since there are no confirmations but it could be telling as to the overall strength of these indices and the stock market.
Why is it important? Because if you buy DRV while RMZ is crashing you can make some pretty insane returns. If you look at the Elliott Wave count on this chart and on the related SPX500 chart you will see that the counts are basically the same, it appears that we are in the midst of a non-limiting triangle that is at the end of a double combination. This means that both the Stock Market and REITs are going to stop growing for the next year or two and then at some point, after the triangle is complete, they are going to collapse. This basically means that the entire US Economy is going to go to shit like it did in 2007-09. Since it is a double combination that would imply around an 80% retracement of the Bull run starting in 2009.
How do we know if this chart is correct? Well we already have the break down out of the channel, and triangles are generally pretty easy to detect even in the very early stages. It also appears that there is significant momentum resistance and we are finding some resistance underneath the channel as well. There's also a perfect double top with the peak we made in the beginning of 2007. At this point it would take a whole lot for this to actually be able to push above the high, and I'd say that it is more or less confirmed. If the high is broken then it may be a good idea to change to a neutral economic outlook until more data is available.
Remember that DRV is the big play here. The gains made from shorting RMZ are nothing compared to what DRV could be worth in a recession. The only reason we look at RMZ is because it is the underlying asset for DRV and because it's wave patterns are much more clear.
The clouds are definitely dark over Cyclical City, I would be seriously cautious about being invested in housing and anything that is cyclical in nature for the next couple of years. The market has had a good run for the last 7 years but now it looks like its time for the cycles to change and for the Economy to once again enter into a bearish period.
Another interesting thing I noticed when I accidentally analyzed the wrong chart, is that the MSCI Inc. Stock (The company that makes these Indices) looks like it could be reaching a peak. This would still be pretty speculative since there are no confirmations but it could be telling as to the overall strength of these indices and the stock market.
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I just wanted to point out the bounce off of this trendline looks extremely bearish and we are likely to find a top here this week. The candles are also very bearish, there is a bearish divergent bar on the weekly and a bearish shark pattern. In conjunction with the stock market weakness today a long-term top this week seems to make a lot of sense.
This means that Real Estate could become bearish for the next few years.